EQC Customer Services GM Bruce Emson replies to a blog post from the Press' Will Harvey: Hi Will,
You’re right – we haven’t explained our apportionment process well. So here goes.
In mid-2011, EQC and the Insurance Council asked the High Court to make a declaratory judgment on whether cover renews after each earthquake or not. The court declared that EQC cover is renewed after each event, so long as the property remains insured. This means EQC needs to determine what damage to a property was caused by each event.
The problem is, there were 13 earthquake events between the September 2010 shake and the end of June 2011, generating 400,000 claims, so we don’t always have an assessment to match every claim.
Before the judgment, that didn’t matter. All EQC had to do was add up the total damage and pay our share, up to $100,000 +GST. Now we have to determine our share for every damaging quake.
If we have assessments for every claim we can apportion and move on very easily. If not, we have to find a way of getting that information. Sometimes we can use private insurers’ information, most times we can’t.
We can also talk to the homeowner, but many don’t have precise details about the extent of damage each quake caused – especially for situations where they don’t live in the house in question (ie: landlords).
So we look for a proxy, and the most practical available is to look at what happened in the houses around your one, and what proportions of damage they suffered.
Currently, this is a manual process of searching for near-by properties, and analysing their claims. It takes a while. We have improved from 2-3 properties per staff member per day to as many as 10 per day, depending on the complexity of claims. We have well over 100,000 properties to do this process with.
Currently a team of 40 has allocated damage across 21,000 claims.
EQC is working to develop an automated process, but it needs to be better than the manual one. This sort of sophisticated business process would normally be developed over a number of years, but we don’t have a number of years.
Any process we develop has to meet with agreement from the other parties financially involved – the insurers and the reinsurers.
Maintaining confidence of reinsurers is more than a courtesy – the amounts they charge for their service, or the extent they provide cover at all, make an enormous difference to NZ’s economy and homeowners paying insurance premiums.
It’s not all bad news, though. Customers who will clearly be over the $100,000 +GST cap, or clearly under cap, no matter how their damage is apportioned, are carrying on through the settlement process without further delay.
Only customers like you, with a claim very close to the $100,000 cap which could go either way depending on the allocation of damage are in the position of waiting for the apportionment process before getting a cash settlement or repairs.
So there you have it. It’s probably not the outcome you wanted Will, but it is hopefully a bit better explained.
Last September, the Earthquake Commission cut me a cheque for about $112,000 for the over-cap damage to my Mount Pleasant home. Then somebody intervened, cancelled the cheque and here I am eight months later, still waiting for payment.
I'm caught in the dreaded apportionment trap, where EQC divines which earthquake caused what damage and then draws on different insurance and reinsurance schemes to pay for repairs.
EQC has done a lousy job explaining how apportionment works in practice, why it's so difficult and why it's taking so long. The state-owned insurance owes its customers far better information than provided so far. Front up, EQC.
To date, the company has published largely identical (and weak) explanations of apportionment on its website, Facebook pages and in reports to Parliament.
All have included, for example, this baffling statement: "Bear in mind that apportionment will not involve allocating specific damage to an event (e.g. broken tiles in the kitchen to the 22 February event). Instead it involves allocating a proportion of the total damage value to each event."
Call me thick, but how does EQC decide what proportion of total damage can be allocated to which earthquake without knowing what specific damage was caused by each earthquake? Doesn't it need to know that the granite bench top in the kitchen cracked in February and the plywood bench in the study was slightly damaged in June in order allocate (apportion!) the cost to February or June?
Replacing the granite bench will cost thousands; fixing the ply bench requires glue and three screws and about 10 minutes. If you're in the reinsurance business, you want to fix the ply bench and stick some other sucker with the granite replacement.
But no. EQC allocates a "proportion of the total damage value to each event". But how?
"EQC uses a variety of methods to establish how damage should be apportioned,'' EQC says on its website, especially when it didn't inspect after each quake. ''This includes asking the homeowner or insurer for details of which damage occurred following each event, and looking at apportionment of damage in other similar properties in the area."
This doesn't seem overly complex, but I was told this week by an EQC staffer that each apportionment takes 3-4 hours. In mid-April, EQC announced it was seeking an ''automated process'' to ease the ''very manual'' burden.
''We're not talking years, we're not talking a year, but I don't want to give you a time frame," said EQC Canterbury events manager Reid Stiven (pictured).
Bearing in mind, the High Court ordered apportionment in September 2011, this looks damningly slow.
But who knows? It might be reasonable if EQC shared with Cantabrians more information about apportionment: How it works, why it's hard, how many staff are working the project, how many apportionment claims have been settled/outstanding, which insurance companies are helping/hindering the project? Give examples. Invent a hypothetical home to illustrate the process. The list goes on.
Press quake reporter Michael Wright this week reported well on the complexities of new foundations for TC3 properties. Give him a call.
UPDATE: The EQC has responded to this blog via its Facebook page. See their response here.